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credit crunch


Maxyboy
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Has anyone heard of any business overdrafts being called in yet? Overdrafts are theoretically repayable on demand.

The reason I ask is that I am a farm manager on an arable farm. We grow crops only like wheat & oilseed rape. Our income & expenditure is very seasonal. We harvest & sow in the summer & autumn then sell the crops throughout the year causing large fluctuations in cashflow. The bank overdraft gets pretty big at times eg. September, when overtime, fuel, repairs bills are at their highest.

Farmers are normally seen as low risk borrowers as they are largely asset rich and cash poor. We pay 1% over base for overdrafts but are worried that we could be seen as a quick source of cash for illiquid banks. Would overdraft repayment demands be seen as an indicator of trouble for the banks? I can't really see agriculture as being a cash source as it contributes little to the UK GDP.

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I don't think that any of the banks would "blanket" reduce or call in any business overdrafts. It wouldn't be good for them. However, I can see that riskier businesses would be under the microscope and those overdrafts secured by debenture and not bricks and mortar or, as in your case, land are likely to come under scrutiny.

1% over base is very good for an overdraft 169144-ok.gif

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[ QUOTE ]

Has anyone heard of any business overdrafts being called in yet? Overdrafts are theoretically repayable on demand.

The reason I ask is that I am a farm manager on an arable farm. We grow crops only like wheat & oilseed rape. Our income & expenditure is very seasonal. We harvest & sow in the summer & autumn then sell the crops throughout the year causing large fluctuations in cashflow. The bank overdraft gets pretty big at times eg. September, when overtime, fuel, repairs bills are at their highest.

Farmers are normally seen as low risk borrowers as they are largely asset rich and cash poor. We pay 1% over base for overdrafts but are worried that we could be seen as a quick source of cash for illiquid banks. Would overdraft repayment demands be seen as an indicator of trouble for the banks? I can't really see agriculture as being a cash source as it contributes little to the UK GDP.

[/ QUOTE ]

With the price of wheat as it is - if it lasts until your next harvet, you should be happy (happier) bunnies (most arable farmers).

Oilseed Rape is also a good earner now with the Bio-fuel demands???

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[ QUOTE ]

With the price of wheat as it is - if it lasts until your next harvet, you should be happy (happier) bunnies (most arable farmers).

Oilseed Rape is also a good earner now with the Bio-fuel demands???

[/ QUOTE ]

Can't complain with the agriculutral commodity prices at the moment or the weak £ vs €. They all help boost income after some very lean years. I do feel sorry for the poor chicken/beef/sheep/pig farmers who now have much higher feed costs without a matching rise in meat prices.

The surge in ag. commodity prices has all but stalled the fledgling biofuels markets - to be competitive again oil will have to rise to $150/barrel! To be honest, biodiesel from vegetable oils & bioethanol from starch (wheat & maize grains) aren't very carbon friendly fuels anyway. If ethanol from cellulose (straw & woody material) can be made commercially viable then that will really help solve the oil dependency crisis.

Getting back on topic, my worry is that as a tenant farmer with no land owned, our asset base is much smaller with the resulting higher gearing and higher risk element. As you rightly said, arable farmers should be seen as a potential source of business going forward, not as a high risk.

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  • 2 weeks later...

Well for me the credit crunch has hit with a thump! I work for a mortgage lender (not high street) and as of 3 weeks ago we stopped lending, the morning after the Bear Sterns sell off.

As things have got worse over the previous 6 months and there is no light in sight, they've announced redundancies of about 50% (90 staff), consultation period in progress.

There is no telling how long this slump will last, but i really can't see any changes for the better until 2009.

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Well for me the credit crunch has hit with a thump! I work for a mortgage lender (not high street) and as of 3 weeks ago we stopped lending, the morning after the Bear Sterns sell off.

As things have got worse over the previous 6 months and there is no light in sight, they've announced redundancies of about 50% (90 staff), consultation period in progress.

There is no telling how long this slump will last, but i really can't see any changes for the better until 2009.

Yep, we seem to be streamlining here at work too, five people fired in the last couple of days.

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